Prepare the sauce: Heat olive oil in a saucepan on medium-high heat. Add the onions and fry for 2-3 minutes. Add the minced garlic and cook for 1 minute or until fragrant. Then add the grated tomatoes, crushed tomatoes, oregano, red pepper flakes and sugar. Bring to a simmer. Reduce the heat to medium. Cook uncovered for 10-12 minutes. Set aside.
Wash and pat dry the chicken breasts. Put each chicken breast between two layers of plastic wrap, on a chopping board and pound them to a thickness of approximately 1/4 inch.
Season each side with salt. In a shallow bowl (large enough to dredge the cutlets), mix together the bread crumbs and 1/4 cup of the Parmesan.
In separate shallow bowl, beat the egg. Dip the chicken breasts (1 piece at a time) in egg and then coat with bread crumbs mixture.
Heat olive oil in a skillet over medium-high heat until hot. Add chicken breasts. Reduce the heat to medium and cook until they are golden brown, about 3-4 minutes on each side.
Preheat oven to 400 degrees F. Spread enough tomato sauce to thickly coat the bottom of a 8x11-inch baking dish.
Place the chicken breasts on top of the tomato sauce in the baking dish.
Pour the tomato sauce over each of the chicken breasts. Sprinkle the tops with chopped basil.
Top the chicken breasts with slices of mozzarella, put two on each chicken breast. Then sprinkle with the remaining 1/4 cup of Parmesan cheese.
Bake in the oven for 12-15 minutes, or until the mozzarella begins to brown. Serve with spaghetti, garlic bread and the remaining sauce.